Deposits above Rs 5,000 only once till December 30

New Delhi: The government tightened cash deposit rules, saying people can bank more than Rs 5,000 in old notes only once between now and December 30, subject to “questioning” and a satisfactory explanation for scrutiny at a later stage.

The government said it wanted to reduce queues at banks, already facing crowding after last month’s recall of high-value bills led to a cash crunch. The new move, which is in sharp contrast to an earlier norm, will also apply to cumulative deposits exceeding Rs 5,000 during December 19-30.

After banning old Rs 500 and Rs 1,000 notes on November 8, the government had allowed all cash holdings with any person to be deposited in bank accounts till December 30. There was no limit on the quantity or value of the junked notes that could be deposited. The government had also asked people not to rush to banks as there was “enough time” to deposit the old bills.  

The Reserve Bank of India (RBI) said on Monday that a person depositing more than Rs 5,000 will be questioned in the presence of at least two bank officials to know why the sum could not be deposited earlier.

“Deposits of old notes have been reviewed by the government from time to time. Already more than five weeks have elapsed since demonetisation was announced. It is expected that, by now, most people would have deposited such old notes in their possession,” an official statement said.

However, Union finance minister Arun Jaitley claimed no questions will be asked if any amount of junked currency is deposited in one go but repeated deposits may raise queries.

“Possibly the reason is to prevent any large-scale money-laundering towards the end of the scheme,” a news agency report quoted Soumya Kanti Ghosh, chief economist at State Bank of India, as saying.

Demonetised currency less than Rs 5,000 will be allowed to be credited to bank accounts normally until December 30.

The RBI has asked banks to ensure that each amount of more than Rs 5,000 in demonetised currency is deposited only in KYC-compliant accounts, and if the accounts are not KYC compliant credits may be restricted up to Rs 50,000. The KYC process identifies and verifies identity of customers.

Under Pradhan Mantri Garib Kalyan Yojana, black money holders can deposit unaccounted cash in accounts, which will be subject to 50 per cent tax and 4-year interest free lock-in for the remaining 25 per cent of the amount.